Recently I was reading an article from Chris Nichols, chief strategy officer of Winter Haven, Florida-based CenterState Bank, entitled Public Perception of the Cost of Checking.
Nichols shares how CenterState interviewed 200 randomly selected potential customers about what they thought about the bank’s pricing and value of its checking accounts. The pricing ranges from a fee of $5.95 to $9.95 per month with a variety of ways to avoid this monthly fee (balance waivers, minimum transactions, etc.) The accounts also have the typical features included—online banking and bill pay, mobile banking and an expanded ATM network. It was also noted that this pricing was lower than competing banks and within the range of 75 percent of banks nationwide. Therefore, the pricing was reasonable and the features, while undifferentiated, were comprehensive.
The feedback from these consumers was that 34 percent of them had negative comments about CenterState’s checking line-up. Clearly, this is a number with lots of room for improvement.
Nichols didn’t go into much detail about the negative comments, but the essence of those comments are similar to StrategyCorps’ own consumer market research about consumers’ attitudes about checking account products.
Fees on Checking Accounts
First, almost unanimously, consumers don’t like to have requirements with a penalty fee structure for not meeting these requirements to access to their own money, especially when those requirements are not fully and clearly disclosed. Very few consumers have a basic understanding of the banking business model, thus don’t understand the business need for these requirements. Even those who do understand banking don’t like these requirements. The reason is the same, they don’t like to pay for access to their own money.
Second, despite the intrinsic value of a consumer checking account—the fact that it’s insured, customers have zero liability debit cards and a myriad of choices on how to bank, including online, mobile, ATM, and in branch, just to name a few—consumers feel it should be “fee-less” to have all this. Why? In short, financial institutions intentionally “sold out” this intrinsic value with free checking. Why pay for these things when they can be had at another financial institution in most cases, literally down the street? Selling out and totally diminishing this intrinsic value was the ante to get to the extremely lucrative source of nonsufficient funds and overdraft (NSF/OD) revenue. While it was the financially right thing to do at the time, the free checking hangover continues to plague financial institutions as they try to get customers to accept monthly recurring account fees to replace declining NSF/OD fees.
How does a financial institution restore the underlying value of a checking account in the eyes of consumers to warrant a more positive perception? At StrategyCorps, what we’ve seen work is NOT to spend time, money and marketing dollars trying to persuade customers that the checking account with traditional bank benefits is worth paying for. Trying to persuade consumers that traditional checking is valuable enough to pay for it, when it has been free for nearly two decades, is a tough proposition.
Instead, spend time, money and marketing on offering new product benefits that consumers will view positively. Which benefits are these? In general, these benefits have to be ones that are already proven in the marketplace that consumers view positively and are willingly and gladly paying for. Examples of these new types of benefits are cell phone insurance, roadside assistance and mobile merchant discounts. Nearly two of every three consumers already view these types of benefits positively enough to pay for them every month (think Verizon, AAA and Amazon Prime). These new product benefits either save consumers money when they have to spend it (effectively making them money) and/or provide protection to everyday items or situations.
So, stop trying to talk your customers into liking your traditional checking account with undifferentiated, traditional benefits they don’t appreciate despite the inherent value of the account. Rather, modernize your checking accounts by adding some new product benefits that are already viewed as valuable.
To see more of our consumer research videos including a variety of topics in banking, mobile apps and more, visit strategycorps.com/shape-your-story.